Wage Law

In a unanimous decision authored by Justice Baxter, the California Supreme Court has held that an employee’s whose employment terminates upon the completion of an agreed-upon period of employment or a specific task, the employee has been “discharged” within the meaning of Labor Code § 201 such that “the wages earned and unpaid at the time of discharge are due and payable immediately. As we expected, Smith v. Superior Court found in favor of employees' rights and discussed, among other things, the absurdity that would have resulted if prompt payment laws applied to "bad" employees who did not fulfill their obligations and were fired, but did not protect employees who fulfilled their teams of employment. The holding was stated as follows:

Excluding employees like plaintiff from the protective scope of sections 201 and 203 would mean that employees who fulfill their employment obligations by completing the specific assignment or duration of time for which they were hired would be exposed to economic vulnerability from delayed wage payment, while at the same time employees who are fired for good cause would be entitled to immediate payment of their earned wages (§ 201) and many employees who quit without fulfilling their employment obligations would have a right to wage payment no later than 72 hours after they quit (§ 202). While we are not prepared to say the Legislature could not validly adopt a statutory scheme that operated in this fashion, our review of the relevant statutory language and the overall statutory scheme, the legislative history, and the intended purpose of the immediate wage payment legislation to address the economic vulnerability of discharged employees and potential harm to the public, leads us to conclude the discharge element of sections 201 and 203 may be satisfied either when an employee is involuntarily terminated from an ongoing employment relationship or when an employee is released after completing the specific job assignment or time duration for which the employee was hired.

The opinion states or repeats a number of excellent quotations that can be included in many briefs discussing wage and hour issues, including:

The public policy in favor of full and prompt payment of an employee’s earned wages is fundamental and well established.

Delay of payment or loss of wages results in deprivation of the necessities of life, suffering inability to meet just obligations to others, and, in many cases may make the wage-earner a charge upon the public.

California has long regarded the timely payment of employee wage claims as indispensable to the public welfare:  “It has long been recognized that wages are not ordinary debts, that they may be preferred over other claims, and that, because of the economic position of the average worker and, in particular, his dependence on wages for the necessities of life for himself and his family, it is essential to the public welfare that he receive his pay when it is due.

An employer who knows that wages are due, has ability to pay them, and still refuses to pay them, acts against good morals and fair dealing, and necessarily intentionally does an act which prejudices the rights of his employee.

[T]he policy involves a broad public interest, not merely the interest of the employee.

Finally, defendant relies on Hale v. Morgan (1978) 22 Cal.3d 388 (Hale) and other authorities in asserting that penalties are never favored by courts of law or equity and that statutes imposing penalties or creating forfeitures must be strictly construed.  (Hale, at p. 401; see also No Oil, Inc. v. Occidental Petroleum Corp. (1975) 50 Cal.App.3d 8, 29.) These authorities and principles do not aid defendant’s position.  The rule of strict construction of penal statutes “has generally been applied in this state to criminal statutes, rather than statutes which prescribe only civil monetary penalties.”  (People ex rel. Lungren v. Superior Court, supra, 14 Cal.4th at p. 312.)  Moreover, Hale, supra, 22 Cal.3d 388, “did not purport to alter the general rule that civil statutes for the protection of the public are, generally, broadly construed in favor of that protective purpose.”  (People ex rel. Lungren v. Superior Court, supra, 14 Cal.4th at p. 313.)

The opinion is also filled with colorful historical references, including a discussion of the treatment of seasonal Alaska cannery workers, and how the Bureau of Labor Statistics (then the agency that enforced wage-related legislation) considered their plight “a grave one, for it must be borne in mind that, when you cast several thousand irresponsible men who are penniless—or almost penniless—adrift in [San Francisco], after they have toiled for five or six months—you add a large factor to the criminal element of the community."

For those looking for hints about where the justices might lean on the Murphy v. Kenneth Cole Productions case, there were some interesting comments about looking to a legislative scheme as a whole, including other related statutes, in order to glean the proper construction, and considering where, by article and division, a code section appears, to determine legislative intent. We think this discussion suggests good news for employees in that debate.

Congratulations to to Petitioner's counsel Kevin Ruf,Lionel Glancy and Avi Wagner, as well as Peter Rukin, Cynthia Rice, Julia Montgomery and others who worked on the amicus briefs.

You can download the full text of Smith v. Superior Court here in pdf or Word format.